The world's second-largest economy is U.S. president-elect Donald Trump's designated bogeyman, threatening it on the campaign trail with tariffs for stealing American jobs, but analysts say U.S. protectionism could create opportunities for Beijing.
For months Trump has railed against China's trade practices, saying it artificially lowers its currency to boost its exporters at the cost of American manufacturing jobs, and threatening to levy a 45% tariff on all Chinese-made goods.
He also denounced the Obama administration's Trans-Pacific Partnership (TPP) trade agreement with Asia-Pacific economies -- excluding China -- that accounts for nearly 40% of the global economy.
Before the election two of Trump's advisors wrote in Foreign Policy magazine that he would "never again sacrifice the U.S. economy on the altar of foreign policy by entering into bad trade deals like the North American Free Trade Agreement, allowing China into the World Trade Organization, and passing the proposed TPP."
The TPP has yet to be ratified by the U.S. and "is now dead," said Mark Williams of Capital Economics.
The demise of that deal, intended to bolster U.S. influence in the region, hands Beijing an opportunity to forge an Asia-focused trade agreement of its own that "excludes the U.S.", he added.
Moreover, "if the U.S. is less engaged in Asia, Beijing will have an opportunity to shape regional political and economic integration on its own terms."
US Retreat
China has already embarked on negotiations to create the Regional Comprehensive Economic Partnership, a free trade area encompassing the southeast Asian grouping ASEAN, China, India, Japan, South Korea, Australia and New Zealand.
Something of a mirror image to TPP, it includes six of the Washington-led grouping's 12 members -- but not the U.S.
It would encompass more than three billion people and Australian foreign minister Julie Bishop told media on Nov. 10 that if TPP does fail, "then the vacuum that would be created is most likely to be filled by RCEP."
Any retreat from trade and engagement by the U.S. could also send its business partners into the arms of Beijing, which regularly offers countries soft loans to encourage deals and has urged its companies to expand overseas and compete directly with foreign firms.
President Xi Jinping's signature One Belt One Road initiative has already made inroads for Chinese construction and industrial firms in central Asia, aided by generous loans from state-owned banks.
Trade War
Trump's threat of a 45% tariff on all Chinese-made goods could set off a trade war between the world's top two economies.
The immediate impact would be felt first by China, which has long enjoyed a substantial trade surplus with the U.S.
Daiwa Capital Markets analyst Kevin Lai said in a note that a 45% tariff would see Chinese exports to the world's largest economy plummet by 87%, or $420 billion.
Even a "watered-down" 15% tariff would see them fall by 31%, he said, according to Bloomberg News, eventually costing China 1.75% of its GDP.
Labor-intensive exports such as agricultural products, iron and steel would be hit hardest, Lu Zhengwei, chief economist at Industrial Bank,said.
But with the Asian giant a key driver of global growth, the ramifications would ripple across the world and ultimately rebound on the U.S.
U..S corporations and legislators would likely lobby against disruptions to trade, Christopher Balding of Peking University's business school said.
"I don't think it is feasible as a matter of politics, and I don't think it is feasible as a matter of legal authority," he said, "even if it seems that with Trump there is nothing you can't rule out."
Moreover, such tariffs would probably prompt a strong response from Beijing, said Raymond Yeung, chief China economist at ANZ Research.
"Any trade retaliation by China against the U.S. could actually hurt U.S. interests severely," he said.
Asked about Trump's tariff threat, China's foreign ministry spokesman Lu Kang said on Nov. 10 that the 200-fold expansion in bilateral trade between the two countries in recent decades had been mutually beneficial.
"Any statesman in the U.S. who has his people's and his country's interests in mind will make the right decision," he said.
By Benjamin Carlson
Copyright Agence France-Presse, 2016
